updated 03:05 pm EST, Sat March 1, 2014

Total Bitcoins loss said to be 850,000 due to system weakness

Troubled Bitcoin exchange Mt. Gox filed for bankruptcy protection in Japan on Friday, breaking the silence on the company's position since suspending trading on February 24. The firm admits that it may have lost nearly half a billion dollars worth of the virtual currency when its systems were compromised by hackers. Mt. Gox is said to have $64 million in debts.

Approximately 750,000 Bitcoins belonging to customers and 100,000 coins belonging to the exchange, valued at over $450 million dollars as of March 1, were said to be lost in the hack when the Mt. Gox systems were breached unnoticed over the course of years. Mt. Gox says there was a also $27.4 million discrepancy in its bank accounts as of Monday.

Reuters reports that Mt. Gox CEO Mark Karpeles, who appeared in a suit rather than his standard T-shit, "bowed in contrition and apologized in Japanese at a news conference at the Tokyo District Court, blaming his firm's collapse on a 'weakness in our system,' but predicting that Bitcoin would continue to grow."

Mt. Gox is said to be looking into approaching the hacking and subsequent theft as a criminal matter, as it "believes there is a high possibility that the Bitcoins were stolen." Customers who had coins with the exchange have little hope of recovering the funds since the currency isn't federally regulated, nor was the exchange significantly backed.

A lawsuit has been filed in Chicago against Mt. Gox on Thursday alleging that the company had failed "to provide its users with the level of security protection for which they paid."

Next time you hear some Republicans prattling on about how all forms of government regulation "inhibit" business and "constrain" unfettered capitalism and free market blah blah blah, remember this incident.

If you hand your friend $10, and someone steals it from him, does the government give you $10? Should the government regulate your friend?

It's easy to jump on the bandwagon and act like Bitcoin is a risk and this proves it, but the reality is, someone other than Mt. Gox hacked in and stole the goods. There are laws against stealing, that doesn't mean squat. If it was a bank, you'd only be insured up to $100,000. So you'd still be boned if you lost millions. Regulation isn't what you might expect it to be.

and followed up with further details the next day:
http://www.electronista.com/articles/14/02/26/crisis.strategy.draft.more.or.less.legitimate.confirmed.by.mt.gox.ceo/

This story, however, is about the official bankruptcy filing and press conference, which took place in Japan on Friday (as you'd have noticed by reading the article). So no, *this* story *didn't* happen three days ago, though it contains a summary of events thus far.

When people have their property stolen after first converting it into a crypto-currency which is almost exclusively the domain of criminals, get-rich-quick con artists, and Libertarian ideologues who rail against the idea that governments should protect people from scams, yes, that's hilarious.

Like most great projects it gets off to a bumpy start. Though bank robbing is a whole different ball game now. The amounts stolen are astronomical. Look at the Wall Street robbers... billions - they can steal Greek airports, whole skyscrapers, massive retirement funds, huge bundles of middle class wealth portfolios etc. The people who did it are free to continue - Goldman - the average income there now for their 3,000 employees: $700,000-. What's the job description? Create chaos.

Your view of cryptos isn't quite accurate, but you can believe whatever you like. It's more like a gold and silver. The gold rush was filled with many unsavory characters and the value of the product was artificially inflated by hype. It was often stolen and traded under the table by criminal types, along with honest workers. I'm not sure it was ever funny when someone had their gold stolen. Just sayin.

The US is 17 Trillion in debt. This is the government using regulation and leveraging imaginary value to overspend your account. Feels like stealing to me. Is that funny too?

Chas_m, I thought your role on this forum was to moderate and correct inaccurate information, not take cheap shots at conservatives, the Tea Party, and Republicans every chance you could get.

Vicar, are you saying criminals, get-rich-quick con artists, and libertarians (idealogue or otherwise) are equivalent. That's a pretty broad stereotyping brush you're swinging. Would it then be fair to equate liars and liberals in the same way?

Burger is right. There are gov't regulations ad nauseum for the banking industry. This is a bank robbery, pur and simple. The point is that it's also a cyber-crime and across many national boundaries, real or imagined. This incident has no precedent. Nor is it on any regulatory map ever drawn. How do the international and national banking regulations apply? And which policing agency is empowered to -- or even in a position to -- find and prosecute the criminal(s)?

Now that this massive amount of bitcoins has been stolen, how does the perpetrator then convert them from cyber-currency into actual or intrinsic value, i.e. gold or some real-world currency? Or do they attempt to deposit these bitcoins into another exchange and hope nobody notices? BTW, do bitcoins have electronic "tags" on them for tracking purposes?

I'm with The Vicar. It is hilariously funny that people who hate government and put their faith in Bitcoins as a way to circumvent regulation and taxation, now go crying to the big, bad government for help after their unregulated "bank" (whose name, by the way, is derived from the original name "Magic The Gathering Online eXchange", yes indeed it started as a way to trade Magic The Gathering cards) gets looted.

I wonder if the Russian gangsters who had their Bitcoins at Mt. Gox are going to be impressed with Karpeles' pleas that the bankruptcy filing discharged his obligations, as they are feeding him feet-first into a woodchipper.

"So when people have their property stolen, if it's not regulated, it's funny?"

Yes, burger, it is hysterically funny when people who hate government and regulation learn the hard way that when you remove government and regulation from the equation, you don't get libertarian utopia. You get rule of the jungle. This is the fatal flaw of libertarianism; every effing libertarian imagines themselves as a Randian ubermensch who will inevitably become wealthy if only the goldurn gummint would get out of his or her way.

Dunno, most of the U.S. debt has been brought about by military and "security" spending (over 60% of the discretionary budget in 2012), and Libertarians have always at least been willing to vote for that. (If there is no Libertarian candidate, self-professed Libertarians always always always vote Republican, the party of wasteful military spending). Don't like debt? Don't vote for the military spenders. It's really that simple.

I'm simply saying that people, who I can assure you are not all libertarians and criminals, were robbed. Yes, Bitcoin presents a means to bypass the regulation that would serve to secure the process, while at the same time that service would siphon off a bit for that security, you know, forever. Surely, there is risk. Not everything works out perfectly all the time, and clearly not in the case of Mt. Gox. Never venturing beyond government subscribed services to stay safe isn't realistic, all of the time. And is rarely possible when taking chances on new technology when getting in before the masses.

Regardless, being stolen from isn't specifically funny, in my book. This situation is ironic. Don't get me wrong, if someone is saying Bitcoin is great because it keeps the government from stealing your money during the transaction process, only to have someone else steal it during the transaction process in a much grander way, gets s chuckle. But the stealing and loss of property isn't the funny part.

Nah. Consider this an object lesson to the victims. Libertarians always go on and on about how we shouldn't have the government holding people's hands and putting up safeguards through regulation. In recent decades a lot of people who are oblivious to the real world have started believing that this ideology would actually work. Many of them acted on it by going off to invest in Bitcoin, which the government doesn't regulate or recommend. With absolute predictability, it turned out to be an invitation to fraud, and they lost their money. Next time maybe they should actually think about what "no regulations" and "no FDIC backing" means... and ignore the Libertarians, who are as stupid as pig manure.

"A lawsuit has been filed in Chicago against Mt. Gox on Thursday alleging that the company had failed 'to provide its users with the level of security protection for which they paid.'"

That's your libertarian remedy and replacement for government regulation; "hey, you can file a lawsuit for damages!" Sure... if the conservatives in your state haven't enacted tort reform laws that cap your maximum award. If you have the finances and emotional fortitude and good health to slug it out indefinitely in court with a much-better-financed opponent. If the company you're trying to sue hasn't gone bankrupt or is hiding offshore. Suing a Tokyo bank in Chicago? Good luck with that. There's a reason they are called "glibertarians".